VA Condominum Complex Approvals: Reserve Study Requirements

The Veterans Administration asks to see a list of documents before approving a condominium complex for VA loans.  One of those documents is a "reserve study".  In California, all condominium complexes are required to have a reserve study performed every three years (with annual board reviews) unless:

1- there are no common areas
2- commercial developments are exempt
3- total replacement costs are less than 50% of the annual gross budget.

This often, but not always, exempts smaller associations (less than ten units).

A reserve study analyzes the association's physical assets and financial reserves then makes recommendations to fund capital projects while maintaining a safe "savings account" (aka reserve fund). The study will make recommendations which might include:

1- raising the monthly HOA dues
2- passing a "special assessment"
3- adjusting the budget to eliminate a "non-essential service" and allocating that savings to reserve funds

The VA is wary of pending special assessments and oftentimes requires the veteran to sign a disclosure that he/she understands that expense will be due within a year.  Other times, that problem is remediated by the seller paying the special assessment at closing.  HIgher HOA dues could affect loan qualification as well.

VA loans are typically 100% financing or very low down payment financing,  It is because of that increased exposure that the Veterans Administration reviews the collateral so closely.

The reserve study is a third-party "set of eyes" which passes judgement on the financial condition of the association.  Whether the complex is approved by the VA or not, buyers should review the reserve study to see what expenses may be on the horizon.

We've approved ove 60 complexes with the veterans Administration over the past 6 years,  Call me at 858-777-9751 to see how we might help you today.